The Importance of Retirement Planning for Families: Building a Legacy and Securing Your Future – Bellwether

You work hard. You have built financial stability for yourself, but you also want to leave your family members with some of that hard work. Retirement planning for families is a step to take early on, even if you have not reached a status that you believe is legacy-worthy. By starting now, you can build a legacy and secure the future for your children, grandchildren, and years beyond.

That may sound ideal, but for many Canadians, the challenging question is how. Where do you get started? To help you with retirement planning from a family perspective, consider how you and each member of your family can work together to ensure long-term wealth preservation.

What Is Family Estate Planning?

Estate planning, of which retirement planning is a component, from a family perspective, is the process of both preparing and building a way to transfer assets owned by the family, including wealth and business interests, from your generation to the next generation.

In the case of a business, the objective is typically to ensure continuity, while other financial aspects focus on creating and securing an inheritance based on family values. In all retirement plans, the objective is to pass down as much as possible to each generation while creating a strategy that enables wealth building, not just using those assets. Moreover, retirement planning and estate planning both work to mitigate tax burdens throughout those generations.

Core Components of Retirement Planning for Families

For affluent families or those that plan to be, working together to create a strategy for wealth preservation, legacy building, and financial independence for future generations is crucial. There are numerous components that must come together to ensure this. It is far more than just retirement savings, but taking those savings and using them to achieve specific objectives. That might include:

Portfolio Management

Within the family unit is a portfolio that holds all of the assets. When choosing a financial advisor, you must work with that professional to consider areas such as:

• Investment policy: What factors will govern investment decisions? Factors such as risk tolerance, family values, and objectives.
• Asset allocation: Where and how will assets be managed? This includes defining the assets that make up the portfolio, such as who the listed beneficiaries are or how they are protected.
• Purchase of securities: Investment strategies related to securities are also a factor, and must be considered from the point of long-term wealth building rather than securities that are more liquid or higher risk.
• Real estate: Ownership, management, and decisions on factors such as sales or upgrades must be considered and defined as a part of the family’s portfolio.

Also, factors related to special situations should be considered. Every family is unique and has very specific objectives or passions that must be met. A financial advisor will create strategies to address those needs.

Business Planning

The next critical concept in relation to family retirement planning is to consider business planning. If your business is a valuable asset you worked hard to build, you may have very specific objectives and requirements you expect to meet as you get older.

Your retirement planning, from a family perspective, must include conversations about business planning. Succession planning is one conversation to have. Will a child or grandchild maintain the business long-term? Under what conditions should the business be sold? Assume that family members do not agree in the long term. How are decisions to be made?

Charitable Giving

Leaving a legacy may, at least in some form, focus on charitable giving. Your family may have specific passions or objectives. Or, it may be time to discuss where your family will focus its efforts in this regard. The benefits of charitable giving, from reputational support to tax reductions, are often critical components of your retirement planning strategy.

Risk Management Strategies

All families must consider risks to protect assets for future generations. Hostile political situations, economic turns, and other events can lead to catastrophic changes in a financial portfolio.

Working with an investment advisor, create a risk management strategy. This should incorporate components of risk and insurance management along with estate planning safeguards. This working plan can help to protect your legacy for generations to come when it is well-designed.

Tax Efficiency

Growing your estate and wealth often means higher taxes. Yet, there are tax efficiency strategies that ensure you preserve your assets and mitigate financial losses you do not owe. Your financial advisor will work closely with you to handle tax planning, ensuring you meet all necessary laws and regulations now and in the future.

Why Family Retirement Planning Is Different

If your financial advisor or current portfolio is not tailored to your affluent family, it is likely missing the mark. Retirement planning through investment products meant for more mainstream families may limit your true ability to achieve long-term financial stability. With factors such as capital protection and steady and sustainable growth in income possible, ensure you are working with an investment portfolio management organization that is specifically geared towards your current wealth.

Effective Retirement Planning Is Not a Single Solution

Retirement planning for families is not a simple plan that all parties must follow. Instead, it requires an investment advisor who will discuss and understand your goals and financial scenario and then create a strategy that is custom-built to address your needs. Ultimately, this is what leads to long-term wealth preservation, legacy building, and financial independence for future generations.

By working with family wealth advisors skilled in this area, your future generations’ financial security becomes easier to manage.